Looking ahead, we are not confident that the sovereign debt issues in Europe will be resolved quickly or easily, they are structural problems that will have to be dealt with over time.

We do not apologize for our fundamental bias. Many professional traders use the fundamentals in conjunction with their technical studies. Many pure technical traders assert that the fundamentals are already in the prices when they are Forex Trading. Well sometimes they are and sometimes they are not. The end of this past week saw a price move that caught most traders unawares. What happened was that credit issues suddenly erupted in Portugal.  They came on the heels of worries about the Greek budget and triggered worries about Spain and then some other nations.

This evolving story triggered a wave of liquidations in a broad range of markets. Both the USD and JPY gained against many instruments for flight to safety reasons as the two have extensively been used as funding currencies for all manner of carry trades. When institutions sell equities they use the proceeds of those sales to pay back the USD or JPY they had to borrow to buy them. The same goes for commodities, gold, oil, commodity currencies, etc. This process can set off a self-reinforcing cycle as the funding currencies become more expensive and carry trade investments fall in value.

We noted on Thursday as the details of the crisis dribbled out that those who follow the fundamentals recognized quickly that a basic change in the markets was under way. On the other hand, we noticed that many technical traders, rather than pulling out, tried to fade the move all the way down.

Recognition of the fact that this was not a status quo move could have saved some of these pure technical traders a lot of money and gotten them on the right side of the market. The bottom-line it is a big mistake to think the all the fundamentals are built into the market. They are not now and never have been. This is not to say that the study of price patterns does not play a major role in successful trading, but traders must realize that they are only part of the puzzle that is trading.

Looking ahead, we are not confident that the sovereign debt issues in Europe will be resolved quickly or easily, they are structural problems that will have to be dealt with over time. In one form or another, these same issues will have to be addressed in most mature economies. In the trading horizon of most Forex traders, liquidation of carry trades are likely to continue to provide support for the USD and JPY and weigh on many of the favored investment vehicles.

John M. Bland has been involved in the forex market for more than 30 years . He is a co-founder of www.global-view.com,the leading forex discussion site and home of the original forex forums. Global-view is a place where forex traders come for currency trading, the latest rumor , breaking news and forex trading flows.